3 more banks for scam-hit sector

Bangladesh Bank on Sunday decided to approve three new banks, dominated by people linked to the ruling party, in the oversaturated financial sector which witnessed failure of banks approved few years ago.
Loan scams has become a byword for the country’s banking sector with defaulted loans standing at Tk 99,370 crore or around 11.5 per cent of outstanding loans.
Economists and experts have been criticising the government for approving new banks when the market is already oversaturated.
With the latest permission for Bengal Bank, People’s Bank and Citizen Bank, the total number of scheduled banks now stands at 62.
The decision came at the central bank’s board meeting in the evening at its secretariat in Dhaka with BB governor Fazle Kabir in the chair, BB executive director Abu Farah Md Naser told reporters after the meeting.
This approval came within four months of giving permission for Community Bank of Bangladesh of Bangladesh Police. 
BB endorsed the proposal for Community Bank of Bangladesh in October 29 last year after awarding nine banks to ruling party-backed businesses in 2013 at the fag-end of the first term of AL-led government’s consecutive third term. 
The central bank board decided to issue letter of intent after becoming satisfied with all the documents provided by the banks, said Naser.
The banks, however, will be issued final approval when each of them would be able to raise Tk 500 crore paid up capital, the BB ED said.
Even though the immediate-past finance minister AMA Muhith on several occasions admitted the number of banks in the country was high, he endorsed proposal for the fresh four banks during his tenure as finance minister.
On September 25 last year, Muhith asked the central bank to give approval for the proposed new banks.
Former Bangladesh Bank governor Salehuddin Ahmed told New Age, ‘Giving approval to new banks will bring no positive outcome if political consideration or any other consideration works behind it.’
‘If we look at the performance of the nine new banks, which were approved earlier, they have performed poorly,’ said Salehuddin, adding that the entities also failed to make any significant contribution by bringing new products in the banking sector for building confidence.
He, however, said, ‘How much the new three banks succeed in terms of financial inclusion and other benchmarks remains to be seen.’ 
What was the use of approving more banks if the new banks failed to contribute, he asked.
In October last year, BB refrained from giving approval to new banks citing deficiencies in the proposals of the three banks.
It cited pending tax-related cases against three sponsors of Bengal Bank, an initiative of Bengal Group of Industries, for deferral. 
Md Jashim Uddin, key sponsor of the bank and vice-chairman of Bengal Group, is the brother of Awami League lawmaker Morshed Alam.
People’s Bank proposal was deferred as asset-related documents of the proposed bank’s chairman MA Kashem, an AL leader in the US, were yet to be submitted, while Citizen Bank lacked sufficient documents, the BB officials mentioned.
Jahanara Huq, mother of law minister Anisul Huq, is the chairman of the proposed Citizen Bank.
In 2013, BB provided licences for nine banks following pressures from politically-influential individuals.
At least two banks approved in 2013 are struggling to survive amid allegations of massive irregularities.
Of them, Farmers Bank, now incapable of repaying depositors money, has been renamed Padma Bank in January this year to restore its image tarnished by the disclosure of series of irregularities through Bangladesh Bank investigation.
Series of irregularities in the bank also resulted in forced resignation of its previous board’s chairman Muhiuddin Khan Alamgir, also a former home minister, and removal of managing director AKM Shamim.
Irregularities in loan disbursement, gross mismanagement and undue interference of its previous board were the reasons behind the miserable condition of the banks. 
The bank has been failing to repay its depositors’ money, forcing the government’s five institutions — four banks and one investment bank — to inject Tk 815 crore to improve the liquidity situation of the bank.
Another Tk 400 crore was also financed to keep the bank alive. 
A BB inspection in 2016 unearthed series of loan scams in the NRB Commercial Bank, another new bank, worth around Tk 701 crore in which a number of directors of the bank and the then chairman of Mercantile Bank Shahidul were involved. 
BB inspection also found involvement of the then chairman of NRBCB Farasath Ali, also a leader of Awami League’s US chapter, along with other members of the board of directors and its managing director Dewan Mujibur Rahman.

News Courtesy:www.newagebd.net